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More or less regulatory intervention for IPOs?
I wonder how many people remember the names NagaCorp and EC-Asia? These were companies which had been granted in-principle approval by SGX to list here back in 2003 but had their IPOs pulled by the MAS at the eleventh hour because of governance concerns - Cambodian casino operator NagaCorp because it had an inadequate track record of internal audits and chip recycler EC-Asia because its offer prospectus was below-par.
To the best of my knowledge though, those were the last times that MAS imposed a higher listing standard on companies than SGX; since then, we've had dozens of China companies list between 2003-2007, all of which enjoyed plenty of attention as governance concerns were brushed aside in the eagerness to play the China theme, followed by most collapsing as those governance worries came back to roost with a vengeance. Those with memories that stretch back even further might recall the case of Pico Art, whose 1989 IPO was canned by the then-named Stock Exchange of Singapore because of concerns over disclosures made by a director.
Over time, the responsibility for imposing quality standards has shifted away from the authorities to the corporate finance sector and the market itself. Catalist firms for example, have to have sponsors for the first few years of their listing and sponsors are responsible for ensuring companies discharge their public and fiduciary duties properly. This is in line with a long-term move away from a merit-based regulatory regime in which the MAS and SGX pass judgement on the merits of a potential investment, to a disclosure-based regime in which companies are disciplined by the market and its participants. One has to wonder though - is there scope for greater regulatory intervention, as in the cases described above? Or should officialdom only enter the picture when things go wrong, or to tweak the rules to ensure greater fairness?
It's a difficult question to answer - certainly I think there should be rules to ensure the "P" in IPO really stands for "public'' instead of "private'' as is the case now with many IPOs going the way of 100% private placement and giving nothing to the public. However, I'm not so sure about whether the authorities should play a greater role in raising the quality bar, or if they should leave things the way they are since the system does - for the most part - to be functioning as intended. To move towards the merit-based system seems to me to be a retrograde step and one not necessarily in line with international practice. Still, I'm sure if serious concerns were to be raised for any IPO, MAS would move as it did in the past to protect the public's interests.
I would however, like to see faster resolution to investigations into episodes where wrongdoing may have occured and heavier penalties when transgressions are proven. After all, a disclosure-based regime can only operate well when strong discipline is enforced quickly.